TMI Blog2014 (9) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D(2)(iii) is in fact related to indirect expenditure incurred for earning of exempt income – thus, there was no infirmity in the order of the CIT(A) and the disallowance under 8D(2)(iii) is upheld – Decided against assessee. Computation of income u/s 115JB – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that provisions of Section 115JB were not applicable to the assessee-bank - The provisions of Sec. 115JB do not apply to the assessee and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee – revenue could not bring any contrary fact or case law which may justify departure from the above finding of the Tribunal – Decided in favour of assessee. - ITA No.3676/M/2012, ITA No.4113/M/2012 and CO/138/M/2013 - - - Dated:- 9-4-2014 - SHRI RAJENDRA AND SHRI SANJAY, JJ. For the Appellant : Shri S. Ananthan, A.R. Mrs. Lalitha Rameswaran, A.R. For the Respondent : Shri Girija Dayal, D.R. ORDER Per: Sanjay Garg: The present are two cross appeals one filed by the assessee and the other by the Revenue and one cross objection filed by the assessee, all directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer on account of Provision for Non Performing Assets (NPA) to the book profits computed under MAT provisions. Your appellants submit that the provision for NPA is a write off and not a provision and thus the same is not attracted by any of the items in the Explanation to section 115JB (2) of the Income Tax Act, 1961. Hence the same should not be added to the book profits computed under MAT provisions. Without prejudice to the above, in case provision for NPA is added to the book profits, then the actual bad debts written off during the year ought to be allowed as a deduction from the book profits computed under MAT provisions considering the same as a withdrawal from reserves/provisions under explanation 1 (i) of section 115JB. (iv) The learned Commissioner of Income Tax (Appeals) erred in confirming the addition on account of Provision for Standard Assets of ₹ 78,18,19,000/- made by the Assessing Officer to the book profits computed under MAT provisions. Your appellants submit that the Provision for Standard Assets is not a provision made in diminution in the value of investments, but it reflects an actual loss incurred in the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 3.1. During the assessment proceedings, AO found that bank had issued shares to the public for which an expenditure amounting to ₹ 9.36 Crores was incurred, that the assessee had claimed deduction at 1/10th of the issue expenses u/s. 35D of the Act amounting to ₹ 93.62 Lakhs. Following the judgments of Hon'ble Supreme Court delivered in the cases of Brooke Bond (225 ITR 798) and Punjab State Industrial Development Corporation (225 ITR 792), he held that expenditure claimed by the assessee could not be allowed u/s. 35D of the Act. In the appellate proceedings; following the orders of his predecessors for earlier years; FAA upheld the order of the AO. When the matter travelled to the Tribunal, Authorised Representative (AR) of the assessee relied upon the judgment delivered by Hon'ble High Court of Rajasthan in the case of Neha Proteins Ltd. (171 Taxman 455) to contend that interest accrued on share application money lying with bank should be adjusted against public issue expenses so as to reduce the amount of public issue expenses for enabling the assessee to claim amortisation under and in accordance with the provisions of Section 35D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had not attributed any expenses for earning the above exempt income. He therefore made a disallowance under section 14A read with Rule 8D of the Income Tax Rules. The ld. CIT(A) however observed from the balance sheet of the assessee that the assessee had sufficient own funds for investments made for earning of exempt income. He therefore deleted the disallowance made by the AO under Rule 8D(2)(ii) of the I.T. Rules but he confirmed the disallowance on account of administrative expenses under rule 8D(2)(iii) of the I.T. Rules amounting to ₹ 13608000/-. The assessee is thus in appeal before us. 6. The ld. A.R. before us has contended that the assessee is engaged in the banking business and core activity of the assessee bank is to accept deposits from public and lending and investing the same. Major part of the total revenue of the bank is interest income and on the other hand interest expenses are major expenditure of the bank. The assessee had sufficient own funds for making investments which were made as per the RBI guidelines. He has drawn our attention to the balance sheet for the relevant financial year and submitted that the investments made for earni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under 8D(2)(iii) is hereby upheld. Ground No.3 8. Vide ground No.3 the assessee has agitated the application of section 115JB of the act to the case of the assessee. It has been submitted that the provisions of section 115JB are not applicable in the case of the assessee bank. The ld. A.R. has submitted that the issue is squarely covered in favour of the assessee in the own case of the assessee for assessment year 2006-07 vide order dated 10.04.13 passed in ITA Nos.2337/M/2011. The co-ordinate bench of the Tribunal while dealing with the identical issue in the own case of the assessee has observed as under: 9. Last ground of appeal is about applicability of section 115 JB of the Act. During the assessment proceedings, AO found that calculation of MAT for the year under consideration was worked out by the assessee at ₹ 87.29 Crores. AO made certain additions to the book profit worked out by the assessee. Besides, he also disallowed certain claims made by the assessee for working of MAT provisions and finally he determined the taxable book profit at ₹ 1,81,23,65,310/- .Assessee preferred an appeal before the FAA. After considering the submissions of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CL) in ITA No. 3390/M/90 for A.Y. 2004-05 it has been held as follows: In view of the above discussions, and following the view taken by a co ordinate Bench in the case of Maharashtra State Electricity Board Vs JCIT (82 ITD 422), which holds that provisions of MAT cannot be applied to electricity companies for mutually similar reason we uphold the plea of the assessee. The pro visions of Sec. 115JB do not apply to the assessee and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee The venj initiation of reassessment Proceedings was bad in law, and we quash the same. 22. The decision of the Ld. CIT(A) is reversed and we hold that provisions of Sec.115JB cannot be made applicable to the assessee. This ground of the assessee is dismissed. 9.3.We have perused the other orders cited by the AR of the assessee-bank. We find that issue is decided in favour of the assessee. Therefore, respectfully following the orders of the coordinating benches of the ITAT, we decide the issue in favour of the assessee. Appeal filed by the assessee-bank for the AY.2006-07 stands partly allowed. 9. The ld. D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating the fact that the provision of section 115JB is a special provision and therefore claim for rebate u/s.88E is not admissible. 8. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. Ground No.1 2 13. The ld. D.R. has stated at bar that he does not press ground Nos.1 2, hence the same are accordingly dismissed being not pressed. Ground No.3 14. The ld. representatives of the parties stated at bar that the required rectification has been made relating to the issue raised vide ground No.3 under section 154 of the Act, hence the same has become infructuous. It is held accordingly. Ground No.4 15. In view of our discussion made above, while deciding the ground No.2 of the assessee s appeal in relation to disallowance under section 14A of the Act, this ground is decided accordingly and the restricting of disallowance of ₹ 1,36,08,000/- under Rule 8D(2)(iii) by the CIT(A) is hereby upheld. Ground No.4 of the Revenue s appeal is accordingly dismissed. Ground Nos.5, 6 7 16. The issue involved in ground Nos.5, 6 7 is correlated to the issue decided vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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